In the Euro Zone, there’s One ‘Real Success Story’

There is one nation in Europe that is showing signs of life amid a gloomy environment and uncertain political environment across Europe and with issues like Greece’s debt troubles and Italy’s banking crisis.

Economists have point out to the media in recent times that Spain is the “real success story” in the euro zone which is indicated by a solid growth rate, strong business activity and rising employment.

“If you forget Germany, Spain is the real success story in this business cycle,” Claus Vistesen, chief Eurozone economist at Pantheon Macroeconomics, was quoted in the media as saying.

Spain’s economic growth accelerated 3.3 percent year-on-year in 2016 according to government data that was released this week. Companies took on extra staff in December, extending the current sequence of job creation to 27 months, IHS Markit said in its services PMI report on Monday. Increase in both business activity and new orders were also indicated by the figures.

Thanks to a strong reform implementation over the last few years, mainly in the labor market and the banking sector, “Spain is one of the most positive stories in the euro zone,” said Federico Santi, analyst at Eurasia group.

“The fiscal stance is much more growth friendly,” he added.

However, a budget deficit and high levels of unemployment is something that the Spanish economy is still struggling with.

Marked well above the 3 percent threshold deemed “acceptable” in European fiscal rules¸ Spain’s deficit should reach 4.6 percent of GDP in 2016 according to projections from the European Commission.

The jobless rate stood at 19.2 percent in November compared to an average of 9.8 percent in the euro area, Eurostat, the EU’s statistics office, said this week. Across the region, unemployment is one of the highest.

However these figures have been downplayed by analysts. Because many Spaniards have gone back to studying or are working without being registered, the figures are somehow “distorted”, said Vistesen from Pantheon Macroeconomics. But above all, over the last few years, the unemployment numbers have declined. In 2015, it was 22.5 percent.

However it is worth noting that it was amid severe political uncertainty that the economic recovery in the country in 2016 took place. Spain had to repeat a general election to try to overcome the political impasse and was without an official government for several months.

While explaining that the failed attempts to form a coalition government were never raising questions over Spain’s membership of the euro and the EU, Vistesen said “the political uncertainty didn’t do anything to growth.”

Even though at a slightly slower pace than in 2016, analysts expect Spain to continue growing looking to 2017. The European Commission’s forecasts a rate of 2.3 percent.